Center for Simplified Strategic Planning

Creating an Environment for Innovation

Dana Baldwin
Senior Consultant, CSSP, Inc.

Dana Baldwin

Once your company has made a conscious decision to encourage innovation, where and how should you start? How do you encourage people in every part of the company to innovate? In this article, one assumes that one has agreed on a consistent definition of what it means to innovate, and that one has the intention of involving as many in the company as possible and appropriate.


Innovation needs a good atmosphere in which to develop. It is definitely a cultural characteristic and must be encouraged and nurtured inside a company. It does not come by simply flipping a switch. One must set an environment that encourages people to think in unusual and creative ways. This is not easy to accomplish when much of business is, by definition, so structured and orderly in its processes. Business, whether products- or services-oriented, needs to have somewhat standardized routines for much of what it needs to accomplish. Innovation, on the other hand, requires thinking out of the ordinary. These two are so different that in order to have effective innovation, care must be taken to encourage and allow unconventional thinking.

Who is responsible for setting the atmosphere for effective innovation? The CEO and top management team must create the environment. They are responsible for establishing a vision (strategy) which embraces innovation. For too many companies, vision or strategy is underrated. Without a vision of where the company is going, often there can be limited success in innovation. Management must create the challenge, the inspiration to push people to stretch, to make the current box bigger. At the same time it must be realistic. For example, a caterpillar can become a butterfly, but not an eagle. The CEO must see his/her job as creating employee excitement and passion, not just as measuring employee satisfaction or financial performance. If one defines the company as more of the same, that's all one gets.

In the book: Orbiting the Giant Hairball, by Gordon MacKenzie, the author tells of an artist who traveled to many different grade schools, showing the students how to do many different kinds of art. His experience is telling: In First Grade, when he asked the question, "Are there any artists here?" he got an overwhelming response. Virtually all the kids enthusiastically put up their hands, eagerly wanting to be recognized as artists. By Second Grade, the response was uniformly around 50% of the class putting their hands up, and by Third Grade the response was only about 10 out of 30 kids who put up their hands. In his analysis of what was happening, the author reasoned that the balance of the kids, those who did not put up their hands, had become "normalized". What he meant is they had learned to think in an acceptable, "normal" way, and no longer considered themselves to be out of the ordinary. In their view, someone who was considered to be an artist was not someone who was normal. Over the last century or so we have allowed ourselves to accept being "normal" and have lost some of the spark of creativity and spontaneity that we start out with as kids. To help bring your company back into the realm of allowing spontaneity and encouraging creativity will be a big challenge. There are many exercises that can help with this transition. If your company suffers from too much "normalcy", you can do some research to bring in the kinds of thought exercises and processes which will help your people shed some of their inhibitions and become more creative.


One key component of this process is knowledge within the company. The better everyone in the company understands the goals and objectives of the company, the better this process of innovation should be. Internal communication, based on openness and with trust developed over years, is a key to setting this atmosphere. This may well not be a strength in many companies. In a recent article in the Grand Rapids Press newspaper, a well-known local company was profiled. In the article, one of the key workers in the shop would not share his personal knowledge about his job for two reasons. First, he was afraid that management would use the knowledge to redesign his job and force him to work flat-out all day. Second, he was afraid that management would take the knowledge and outsource the work, putting him out of a job. Stepping back to look at this situation, one might well suspect that there is little or no trust of management by the workforce. Can you imagine trying to develop an atmosphere in which innovation and creativity are encouraged without succeeding at changing this low level of trust into something much more positive? A change like this will take many years and much hard work on the part of the entire company, not just management, in order to get to the level of trust required to get people to open up and really participate effectively.


Top management must encourage innovation by setting forth one or more challenges to the appropriate people. Without a challenge, there may be no drive to innovate, nothing to provide the impetus. One familiar example is the challenge that President John F. Kennedy gave the nation when he told Congress that it was his intention that the United States would put a man on the moon by the end of the decade (of the 60s), and bring him back to Earth safely. That one challenge opened a wide ranging set of doors for this country. Think of all the inventions, developments and advances we have gotten from that one challenge. Transistors, micro-electronics, medical monitoring devices, telecommunications devices and many more inventions and developments all came out of the space race. Without the overriding goal set forth and effectively communicated by President Kennedy, it is unlikely that all of these inventions would have come along as quickly as they did. The resulting higher levels of technology have changed the way we live, the way we do business and especially the way we communicate. Many of them might well have been developed in due course, but over what time periods and at what cost to society? With the specific challenge issued by President Kennedy, the needs and preferences of the contributors to the project became known and addressed. And this is what needs to happen in your company if innovation is to happen.


In earlier articles in this publication, we have discussed brainstorming as a source for the ideas for the innovation process. But where do the ideas that are brought out in the brainstorming session come from? One area is inside the company. Your fellow employees are most often a good resource for ideas for improvements in internal processes, product improvements, service improvements and customer contact improvements. They are often the ones in the trenches who see the possible problems in the products, processes or services. Internal communications are critical to the effectiveness of this process.

Another idea source is the customer. Knowledge of customersš preferences is absolutely critical. Very few companies can innovate effectively without comprehensive knowledge of their customersš needs and preferences. By some estimates, roughly 50% of all innovations come from customers. What are you doing to get close enough to your customers that you can tap them for ideas? This effort needs to be an on-going, real effort, not a quickie, one time shotgun blast to see what can be dragged in. You need to be cultivating enough of a relationship with your customers that you have two-way communication flowing on a regular basis. You need to have programs in place that will allow and encourage your customers to communicate with you, not just when they have a problem, but when they have a success as well. You should encourage your customers to use you as a resource, even when you do not have the product or service they need. When you get to the point where they call you and ask for guidance on something they know you donšt offer, you have earned their respect and you have established reliable and effective communications. Take advantage of this relationship to help you both. Ask for feedback and constructive criticism. Ask for their ideas about what they and others will need in the future. Put these ideas through the same filters you put your own ideas through. Many will not be earthshaking in their potential, but one or two might be the catalyst for the true winner down the road. Effective listening can make a tremendous difference, so you need to train your customer interface people to hear what your customers are saying, not just the words.


In addition to an encouraging atmosphere, there must be some procedures established to channel the innovation process. This sounds like a contradiction in definitions, but unstructured thoughts, while necessary for brainstorming, can lead to missed opportunities and wasted resources in much of the innovative process. In general, the creative process is reasonably well structured. It starts with setting the environment to encourage idea generation. This requires focus in particular areas of interest, so that there is not a dilution of concentration. Brainstorming for ideas is next, with the one rule that there are no bad ideas. The reason for this is really quite simple. If we introduce any judgment of ideas at this part of the process, we will surely discourage the creative thinking needed for truly creative thought. As a result, we will likely limit the effectiveness of the brainstorming and, more importantly, the synergy of idea development. At times, someonešs off-the-wall idea which, by itself, will have no chance of being adopted, will stimulate a truly creative, effective idea in someone elsešs mind that might turn out to be the real winner for the company. Please recognize that the innovation process is typically demand driven, that is, it is usually responding to the needs and preferences of the customer. While structured to a point, it is nevertheless chaotic at times, often delivering the unexpected. Whereas, in the normal course of business, the logical, organized types often excel and prevail, in the type of thinking needed for true innovation, the leaders are often those who are firebrands and free thinkers, those with the unusual mind. Their ideas often create suspicion and opposition (i.e.ŠWešve never done it that way before!). To be successful often means that the process requires crusaders and those who will champion a project with passion and drive.

Please note that these ideas do not need to be focused on the products or services the company presents to the market place; they can be directed to the internal processes of the company as well. Productivity improvements, internal process improvements, quality improvements are all fair game for this process. Any appropriate way to lower costs, increase quality and respond better and more quickly help obtain and retain customers, and after all, it is the customers who pay the bills.


Depending on the amount of time required for something to be thought up, developed, tested and brought to market, your approach may be quite different. With short horizon projects, the number of people and the scope of the project will of necessity be small. (See table below). As time horizons expand, so does the size of the team, the type of innovation and the scope of the project. The incentives also grow in proportion to the scope of the project, and the risk most likely does, too.

Time Horizon 1-2 years 3-6 years 7-20 years
Type of Innovation Incremental Step function
- longer term platform for annual features and options
Incentive individual basis
this year's profits
team basis
medium term options with matched vesting period
personal security, salary, tenure, fame, secure retirement, sabbaticals, long vesting stock
Team Size small (1-3) bigger (10-100) very large
Mgt. Style fast, decisive, ego driven team based, consensus bureaucratic, nurturing
Pricing/Marketing skim pricing with mark downs tprice for volume to get down experience curve first, target price price for long term profits, defensive- keep others out, monopoly prices if protected


Setting an atmosphere in which innovation is encouraged is often highly correlated with the long term success of a company. Each of the elements explained above is critical to the effective innovation process. Challenge yourself and your senior management team to develop the skills and the atmosphere in which effective innovation becomes a part of your ongoing strategic planning. It is highly probable that your long term survival and viability depend on it.

Dana Baldwin is a consultant with Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at

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